Food prices taking a big bite out of budgets

When you go to the grocery store, is the cost of food eating at you? For years, people grumbled about having to pay a lot more to fuel their cars. Now they also pay a lot more to fuel themselves.

Robert Wang

When you go to the grocery store, is the cost of food eating at you?

Laura Robbins has had her fill of rising food prices. The mother of three remembers the days when milk cost $2.19 a gallon. Now, the 31-year-old is seeing the price approach $5 at the Massillon, Ohio, Wal-Mart. Inflation also has struck other supermarket aisles.

Everything from bread to eggs to cereal is more expensive.

For years, people grumbled about having to pay a lot more to fuel their cars. Now they also pay a lot more to fuel themselves. The price of food around the world has risen significantly in the last year — with price increases driven by the production of ethanol, rising incomes in Third World countries, a hefty increase in the price of gasoline and the slumping value of the U.S. dollar, economists say.

Up, up, up

Food and beverage prices increased 4.5 percent in the year before February, higher than the overall rate of inflation, according to the U.S. Department of Labor's Bureau of Labor Statistics. A year ago, that figure was 3.1 percent.

In the last 12 months, the price of wheat has more than doubled. The cost of corn has jumped more than 23 percent, and the price of one type of soybean has increased more than 56 percent. Cheese, coffee, eggs and sugar also are more costly.

"Anything involving wheat, bread, flour, we're seeing increases coming so quickly that we're just kind of amazed," said Jeff Fisher, president of Fishers Foods, who added that his grocery chain is resisting passing the increases to customers. "At this point, we're not taking a loss, but what we are is ... making less than we typically would."

Wholesale food prices did decrease significantly recently due to a broad market sell-off that could provide some relief. The wholesale prices of some meat have dropped below levels of a year ago, but many prices, especially for grains, remain higher than those for March 2007.

"Consumers have to tighten their belts. There's just no two ways about it," said William Shughart, a professor of economics at the University of Mississippi.

Families try to cope

Robbins said that with three children to feed, the price increases are straining her family's finances. And it doesn't help, she says, that she can't find a job, in part because she's deaf. Her husband earns $10.95 an hour loading trucks and doing inventory reports.

The family is living paycheck to paycheck and has no savings. She and her husband have quit smoking, and the family has stopped going out for activities such as roller-skating.

"The kids are bored with staying at home more," she said. "We're never getting ahead. ... We just keep paying more and more."

Jo Ann Kirkpatrick buys the cheaper versions of brand-name items. Kirkpatrick, 32, whose husband is a steelworker, said despite attempts to save money, she's spending $70 to $80 more a month on groceries to feed her six children. Her groceries cost about $700 monthly.

Forgoing the area's main supermarket chains, she buys in bulk at stores such as Sam's Club. And she's planning to start a garden this summer.

Causes of food inflation

Economists cite several reasons for the price surge. For one, farmers are devoting much of their corn production — at least 25 percent by one estimate — to making ethanol, a renewable additive for gasoline. But that reduces the supply of corn for livestock feed and human food.

In addition, farmers who may have used their fields to grow wheat or soybeans now are raising corn to produce ethanol instead.

A greater number of people in third-world countries also are earning higher incomes, generating demand for a strained supply of basic food.

The rising cost of gas and fuel has increased the price of transporting food to stores. The weakening dollar is playing a role, making food imports from abroad more costly and making the U.S.'s food exports less expensive for consumers in other countries. In addition, a drought in Australia, a major wheat exporter, has reduced the grain supply.

Trying to minimize impact

Shughart said so far, manufacturers have not passed all of the price increases in raw materials to the consumer. They're accepting less of a profit margin or taking a loss.

"Because the consumer can substitute," he said. "If Kraft, for example, raises the price of macaroni and cheese in a box, consumers can do two things. They can either switch to not eating macaroni and cheese at all, or buy the macaroni themselves and buy the cheese themselves and make it from scratch at home."

Mike Pastore, president of chicken producer Park Farms in Canton, Ohio, has seen the price of corn feed for chickens rise to $5.41 a bushel from $3.50 in April, and soybean feed costs jump to more than $350 a ton from less than $200. So far, Pastore's company has not significantly raised prices of the chickens.

"You get to a saturation point where people say they're not going to buy chicken. They're going to buy macaroni and cheese."

But, "at some point, our only recourse is to start passing along (the rising costs) if we're going to stay in business," added Pastore, who fears a price of $7 a bushel on corn.

Inflationary times

Chris Ferris, 43, usually looks at the supermarket ads in the newspaper and carefully plans out her grocery shopping to get the deals. She and her family have stopped eating out every Friday.

Ferris said her grocery bill has increased to $350 every other week from $250.

Rae Lynn Maley, 44, a mother of five, has cut back on buying snack foods.

"There's nothing left anymore to take the kids to the movies," said Maley, whose husband is a Republic Engineered Products steelworker. "I can't rent movies anymore. ... It's gotten so tight especially with the price of gas, too."